(Reuters) - Xerox Corp's (XRX.N) results and outlook beat expectations on improving corporate demand for printing and document management services, while its purchase of ACS brought in revenue from outsourcing services.
It was the second straight solid quarterly report from Xerox, which said that businesses are using their printers more, boosting sales of high-margin ink, toner and paper even as equipment sales are still lagging from the recession.
The world's No. 1 supplier of digital printer and document management services said profit excluding restructuring costs and other items was 18 cents a share, above the average analyst forecast of 13 cents, according to Thomson Reuters I/B/E/S.
Xerox shares rose as much as 12 percent to their highest level since September 2008, and were still up 7.9 percent at $11.27 on the New York Stock Exchange at midday.
"What we are seeing is an improvement in usage -- that's a very good sign for the economy, which means that businesses are printing more, and that means that people will want new equipment," said Cross Research analyst Shannon Cross.
The results come in the first quarter that Chief Executive Ursula Burns reaped the benefit of Xerox's $6.4 billion acquisition of Affiliated Computer Services (ACS), which manages back-office systems and provides technology services.
Burns' previous expertise as a top operations manager of the Norwalk, Connecticut-based company is a boon to Xerox, which is trying to convince cost-conscious companies to buy new equipment and sign service contracts.
"She's an 'X's and O's' kind of person," said Brean Murray, Carret & Co analyst Ananda Baruah, referring to a football coach who excels at strategic execution. "Coming out of an economic downturn, if allowed to apply her skill set, she has a chance of doing really well."
Xerox forecast a second-quarter profit after items of 20 to 22 cents a share, and a 2010 profit at the high end of its previous guidance of 75 to 85 cents per share.
Analysts on average had expected a profit of 18 cents a share in the second quarter and 81 cents for the year.
ACS HELPS REVENUE
The net loss in the first quarter was $42 million, or 4 cents a share, Xerox said. That compares with a year-earlier profit of $42 million, or 5 cents a share.
Xerox, whose rivals include Ricoh Co (7752.T), Oce NV (OCEN.AS), Canon Inc (7751.T) and Konica Minolta Holdings (4902.T), said revenue rose 33 percent to $4.72 billion, beating analysts' forecasts of $4.65 billion.
Sales were helped by the acquisition of ACS, which was completed eight weeks before the end of the quarter.
Equipment sales grew 4 percent. Xerox said that more than 80 percent of its cash flow comes from the sale of supplies, financing and services to repeat customers.
The company's results come two days after Ricoh said its operating profit for the fiscal year ended last month would be 44 percent larger than previously forecast due to cost cuts and recovering demand
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